In May 2022, the Albanian Government officially reported and recognized Liabilities, as a result of lost arbitration cases, in the amount of 175,857,595 Euros.
The latter have been accumulated due to 15 Arbitration cases, in which our state has lost going against Business Parties. Sixty-three percent of the lost value belongs to one case, known as the Becchetti case.
In two years, the actual liabilities of the Albanian state due to losses in arbitration have increased by another 66.37 million Euros, given that, in 2020, the accumulated liabilities recognized as such, therefore accepted by the Albanian government itself, were 109,485,296 Euros, as concluded in a previous Article. The liabilities have grown by a robust 62%.
Meanwhile, about 18.2 million Euros were liquidated, with support from the State Budget, for the referred period, concerning expenses for the legal protection of the State in arbitration procedures.
Table: Accumulative Arbitration Liabilities of the Albanian State, in EURO, May 2022
Source: MFE
Comments and Analyses: Open Data Albania
Source: MFE
Comments and Analyses: Open Data Albania
The above mentioned data comprises official information, whose source is the Government itself and the documentation that the latter has presented to the Parliament. But, in addition to the already finalized cases, the country faces other potentially loses in Arbitration, which are estimated at 190 million Euros and are listed below in this article. Liabilities from Arbitration, Recognized and Potential new ones amount to around 366 Million Euros.
Only during 2022, five international arbitration verdicts have been finalized, increasing the liabilities in the state budget. Specifically:
1. On March 29, 2023, the final verdict was taken concerning the case of Hydro srl and others against Albania (the Becchetti case), once again confirming the private party as the winner against the Albanian state. The liabilities of the Albanian state in this case are in the amount of 108.2 million Euros, as direct compensation to the Investor and 2.61 million Euros as administrative and legal fees covering the arbitration process. Until May 2023, the Albanian state has paid about 1.39 million Euros in legal fees, representing the country in arbitration. The remaining obligation to be payed off is about 109.2 million Euros.
The reason for of dispute between the parties is the impediment in the realization of investments in the Kalivaci hydro-power plant, Agon Set Television and the waste treatment plant by the companies Hydro s.r.l. and Costruzioni s.r.l. In addition to Francesco Beccheti, other shareholders Mauro De Renzis, Stefania Grigolon and Liljana Condomitti are parties to the arbitration trial.
2. Another case related to the Becchetti Family is the one between AlbaniaBeg Ambient sh.p.k, Construzioni srl, Angelo Novelli vs the Ministry of Tourism and Environment, which was registered on November 7, 2014. The object is related to the energy production project through waste management. The company has requested compensation from the Albanian government for the revocation of the contract regarding the importation and processing of urban waste, with the aim to produce electricity. The first decision by the Court of Arbitration on March 20, 2020 declared Albania the winner. Then, AlbaniaBeg Ambient sh.p.k contested the decision before the Court by presenting new evidence, and as a result, on May 6, 2022, the Court of Arbitration overturned its previous decision, declaring the investor as the final winner.
3. Another finalized case is that of Hydro srl II vs Republic of Albania, which is also related to the Becchetti Family. The case was registered at ICSID in 2017, with plaintiff Hydro Srl and defendant Republic of Albania. The facility is related to the production of renewable energy and the waste management project. In the final decision, dated May 31, 2022, the Court finally decided to close the proceedings, with the Republic of Albania winning. The court decided that Hydro SRL should pay Albania the sum of 60,000 Euros under Article 700 of the Code of Civil Procedure, as well as court costs. Regarding this case, the Albanian state has recognized only the legal expenses in the amount of 491 thousand Euros, of which it has liquidated about 96.3 thousand Euros.
4. Another decision issued against the Albanian government concerns the case between the Investor JV Copri Construction Enterprises etc. against the Albanian state. Despite Albania’s request to cancel the decision, the Court of Arbitration once again confirmed the private party as the winner on May 31, 2022. The plaintiff in this case, JV Copri Construction Enterprises and others, have raised claims regarding the Contract for the “Construction of the Road Segment Tirana- Elbasan No. 1 and No. 3.”
The plaintiffs’ claims relate to irregular contract amendments, imposition of additional costs and project changes. On September 1, 2020, the ICC Arbitration declared the private party as the winner, resulting in costs to our state budget in the value of 45,367,986 Dollars or about 42,915,256 Euros. Meanwhile, administrative and legal fees accumulated are estimated in the amount of 691,000 Euros, of which 541,400 Euros. Until May 2022, the Albanian government has liquidated about 400 thousand Euros.
5. The case Arka Energy B.V vs. Albania, initiated on December 18, 2020 by the company Arka Energy B.V., which was a participating company in the consortium announced as the winner, via an international tender procedure – by the Ministry of Infrastructure and Energy,- for the construction of the Photo-voltaic Park in Akerni in 2018. This case was discontinued in July 2022, due to non-payment of the advances required in ISCID Financial Administrative Regulation 14(3)(d). The Albanian government has recognized as obligation only the legal expenses for organizing the defense, in the amount of 1.9 million Euros.
Meanwhile, the cases registered with the International Center for the Settlement of Investment Disputes (ICSID) in 2020, have begun to bleed costs into the state budget, regarding the legal expenses of the defense in the arbitration, although the value claimed by the investors still remains a liability contingency.
- The case Durrës KURUM Shipping sh.p.k and others vs Republic of Albania was initiated on September 23, 2020 by the company Durres Kurum Shipping and other parties against the Albanian state, due to the unilateral termination of the concession contract for the management, operation, maintenance and technical improvement of the container terminal in the Port of Durres, as well as due to the acquisition of the terminal’s assets by the Port of Durrës Authority. According to ICSID, the amount of compensation claimed by this company is 100 million Euros. Regarding this case, up until May 2022, the amount due recognized by the Albanian state is about 2.47 million Euros, of which 83,805 Euros have been liquidated.
- The case Costruzioni DONDI & KUBOTA CO. vs. The Republic of Albania was initiated in 2018 by the company Costruzioni Dondi & Kubota co., which is the implementing company of the contract signed on 30.01.2014, ‘For the improvement of the Sewerage System of Greater Tirana’ with a value of about 81 million Euros. The contract was terminated on 04.07.2018 unilaterally by the Ministry of Infrastructure and Energy, contrary to the financing agreement and the terms of the contract. Until this date, the works were completed about 70% or in the value of 56 million Euros. For the termination of this contract, contrary to the financing agreement and the terms of the contract, the Contractor has opened proceedings in the court of the International Chamber of Commerce, London. The compensation claimed is 90 million Euros, the case is still in court. Meanwhile, the Albanian state recognized as liabilities the amount of 2.07 million Euros, of which 1.92 million Euros were liquidated.
Next, the case between Bankers Petroleum Albania (BPAL) vs Albpetrol sh.a and the former Ministry of Energy and Industry MIE. The public company Albpetrol sh.a and the former MEI, represented by National Agency for Natural Resources, are implementing the Hydrocarbons agreement with Bankers Petroleum Albania (BPAL) for the development and production of oil in the Patos-Marinez field. During the implementation of the agreement, Albpetrol sh.a and AKBN filed a claim for non-compliance by BPAL. The claim consists of the refusal of by Albpetrol and National Agency for Natural Resources to recognize hydrocarbon costs incurred by BPAL in the amount of 600 million USD, contrary to the hydrocarbon agreement. Regarding this claim, in September 2015, BPAL submitted a request for international arbitration to the ICC (International Chamber of Commerce) against MIE/NANR and Albpetrol.
Another obligation arises from the conflict of the Albanian state with Anglo-Adriatic Group Limited, which created the Anglo Adriatic Investment Fund sh.a in Albania, in order to collect privatization coupons. This conflict costed the Albanian State 1 million Euros. The case in arbitration was won by the Albanian state, but the payment is recognized for the the Arbitration proceedings administrative expenses, which are recognized by the state budget, but still not taken care of.
The value of 1,069,500 Euros must also be paid from the State Budget to cover for the conflict between the Ministry of Agriculture and Rural Development and the company Valeria Italia s.r.l., a value which represents the total cost of legal expenses for the organization of defense and the initial costs of arbitration. The Italian company Valeria s.r.l. has started the arbitration proceedings against Albania in 2018, in connection with an enterprise concerning farming of agricultural products. Until May 2022, 769,500 Euros have been liquidated by the Albanian state. There is still no Final Verdict on this issue.
Another amount due to be paid by the State Budget is the obligation to the company “J&P AVAX” s.a., in the amount of 4,214,402 Euros, as a result of the conflict between the company and the former Ministry of Public Works, Transport and Telecommunications (today the Ministry of Infrastructure and Energy). The conflict arose due to disagreements between the parties, during the implementation of contract no. C-006, dated May 22, 2005 “For the construction of the road segment Gjirokastër-Tepelën, part of the North-South corridor”.
The conflict between SAFA LLC and the Ministry of Infrastructure and Energy has cost the state budget 3,543,338 Euros. The issue is related to the design and construction of the Tirana-Elbasan road.
The Ministry of Finance and Economy recognizes as an obligation of the Arbitration of the Albanian State to the Private Party, the value of 500,000 Euros, on behalf of HFW LLC Port of Karpen, of which only 232,457 Euros have been paid off. The passing of the Law No. 77/2016 on “Determining the special procedure for the negotiation and conclusion of the contract with the facility, design, construction, operation, maintenance and management of the port of Karpen, the supporting area of the port and the economic one, between the Albanian state and the company “Star Bridge Port Developments Limited”, the construction of a deep-sea port in the area of Karpen, Kavaje, port support facilities, accompanied by a free trade zone, as well as the construction of a liquefied natural gas (LNG) regasification terminal and a power plant. This law was published in the Official Gazette no. 154, dated 16.08.2016.
Also, another 250,000 Euros are to be payed by the Albanian state as an arbitration liability to the company Tirana International Airport sh.p.k. In relation to this case, the State Attorney’s Office on 19.04.2019 announced a call for the provision of foreign consultancy services, in order to protect the interests of the Albanian state, in case of the negotiation or possible revision of the Concession Agreement related to Tirana International Partners SH.P.K, for “Mother Teresa” Rinas International Airport, Tirana. The obligation is recognized by the State Accounts and currently, only 150,000 Euros have been liquidated from the total amount due.
Several other open cases pending in the International Arbitration can potentially result in additional costs in the state budget, if the Verdict of the International Arbitration Courts is issued again in favor of the private party.
In total, potential liabilities that can materialize in additional budget costs are 190 million Euros. More specifically, it is about the compensation claimed by Durrës Kurum Shipping sh.p.k and others, as well as Costruzioni DONDI & KUBOTA CO.
This value is expected to be higher due to two other proceedings opened in the last two years.
More specifically, EMS Shipping&Trading GmbH vs Republic of Albania, case registered at ISCID on 7 April 2023. Since 2013, EMS has established EMS ALBANIAN PORT OPERATOR (EMS APO) for the implementation of the concession contract for the Eastern Terminal of the port, which allows the company to load and unload ships. EMS has opposed the new port transformation project that would require them to move their operations to Porto-Romano. There is still no information about the damages claimed by the plaintiff, but based on the importance of the object of the contract, hundreds of millions of euros can be expected as liabilities.
Another issue is the one between Ivicom Holding GmbH vs Albania, registered in December 2022 at the Stockholm Chamber of Commerce. The reason for the filing is the refusal of the Albanian state to grant an environmental permit for the construction of a combined cycle gas turbine power plant in Korçe. The cost of the project was planned to be 618 million dollars. There is no information yet on the amount of the compensation, claimed by the plaintiffs.
If these decisions are taken in favor of the Private Investors, it would automatically increase the Albanian State overall liabilities. Currently, taking into consideration only the claimed obligations of Durrës Kurum Shipping sh.p.k and others and Costruzioni DONDI & KUBOTA CO, the total value of the obligations of the Albanian State towards the winners in Arbitration cases is calculated to be around 365,857,595 Euros.
Source: MFE
Comments and Analyses: Open Data Albania
The information provided in this article were extracted from the Mid-Year Report on the implementation of the 2021 and 2022 Budget, which are official documents that present a general assessment of the country’s economic situation, macroeconomic, fiscal and budgetary indicators for the 5-month period of current year. Also, other beneficial sources of information used were the official web pages of the International Center for Settlement of Investment Disputes (ICSID) and the International Chamber of Commerce (ICC)
Download excel:Comments and Analyses: Open Data Albania
Translated by: Rezarta Cushaj